22 02 28 Afp Updated Country Report Japan

Underwritten by
CASH AND TREASURY MANAGEMENT

COUNTRY REPORT
JAPAN
Executive Summary
Banking
The Japanese central bank is the Bank of Japan (BOJ). Bank supervision is performed by the
Financial Services Agency (FSA).
Japan does apply some central bank reporting requirements. These are managed by the Ministry
of Finance (MOF) through the BOJ, according to the rules set out in the Foreign Exchange and
Foreign Trade Law and relevant regulations.
Resident entities are permitted to hold fully convertible foreign currency bank accounts
domestically and outside Japan. Non-resident entities are permitted to hold fully convertible
domestic and foreign currency bank accounts within Japan.
Japan 33 city banks, including four large city banks – Mizuho, Mitsubishi
UFJ, Sumitomo Mitsui,
Resona – and 13 trust banks. There are 62 first tier regional banks and 37 second tier banks. Fifty-
six foreign banks have established operations in Japan.
Payments
Japan’s four main interbank payment clearing systems are BOJ-NET, FXYCS, Zengin and the BCCS.
In addition, there are seven Japanese banks that are Settlement Members of CLS Bank.
The most important cashless payment instruments in Japan are electronic credit transfers in terms
of value and, in terms of volume, electronic-money and payment cards. Checks are primarily used
for business-to-business transactions, while direct debits are widely used among individuals and
businesses to make regular payments. Though the Japanese have been slower to adopt credit and
debit cards, their usage, particularly of credit cards, is increasing rapidly.
Liquidity Management
Japanese-based companies have access to a variety of short-term funding alternatives. There is
also a range of short-term investment instruments available.
Cash concentration is the more common technique used by Japanese companies to manage
company and group liquidity. Of the available techniques, zero-balancing, though not as frequently
used as in comparable countries, is the most commonly used.
Notional pooling is available in Japan. However, it is not often used, primarily because the tax
implications for it are unclear and can make notional pooling too complicated.
JAPAN
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Trade Finance
Japan is a member of the Asia-Pacific Economic Cooperation (APEC), the World Trade
Organization (WTO) and a dialogue partner with the Association of Southeast Nations (ASEAN).
Japan has signed free trade agreements (FTAs) with Australia, Brunei, Chile, India, Indonesia,
Malaysia, Mexico, Mongolia, Peru, the Philippines, Singapore, Switzerland, Thailand and Vietnam.
Japan is currently negotiating FTAs with Canada, China, Colombia, the EU, the GCC, the Republic
of Korea and Turkey.
© February 2022, AFP Country Profiles.
The material provided by PNC Bank, National Association (PNC), the Association for Financial Professionals (AFP) and AFP’s
contracted information supplier is not intended to be advice on any particular matter. No reader should act on the basis of any matter
provided by PNC and AFP and AFP’s contracted information supplier and third party suppliers in this document without considering
appropriate professional advice. PNC, AFP and AFP’s contracted information supplier expressly disclaim all and any liability to any
person in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance upon
the contents of this document.
The information provided is frequently subject to change without notice. The data and software are provided “AS IS” without any
express or implied warranty of any kind including, without limitation, warranties of non-infringement, merchantability, or fitness for any
particular purpose. PNC, AFP, and AFP’s contracted information provider do not represent or warrant the information contained in this
printed report, on this web site or on referred sites or sites accessible via hypertext links is complete or free from error and expressly
disclaim and do not assume any liability to any person for any loss or damage whatsoever caused by errors or omissions in the data or
software, whether such errors or omissions result from negligence, accident, quality, performance of the software, or any other cause.
All rights reserved. No part of the material provided by PNC, AFP and AFP’s contracted information supplier and third-party suppliers
may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying,
recording or otherwise, without the prior written permission of AFP and its contracted supplier.
JAPAN
3
PNC’s International Services
PNC can bring together treasury management, foreign exchange, trade finance and credit
capabilities to support your international needs in a coordinated and collaborative way.
International Funds Transfers countries where you do business can help you simplify
PINACLE®, PNC’s top-rated, online corporate banking your international transactions. PNC offers two service
portal provides access to International Funds Transfers models to help you open and manage accounts at
to more than 130 countries in U.S. dollars and foreign other banks in countries outside the United States.
currencies. Q
QPNC Gateway Direct comprises an increasing number
of banks located in many European countries and
Multicurrency Accounts parts of Latin America. PNC’s team will serve as a
Demand deposit accounts that hold foreign currency point of contact for setting up the account, help with
instead of U.S. dollars offer a simple and integrated way any language and time barriers and will continue
to manage and move money denominated in more than to serve as an intermediary between you and the
30 currencies, including offshore Chinese Renminbi. bank you select. You can access reporting and make
In addition, our EUR and GBP multicurrency accounts transfers via PINACLE.
(MCAs) are able to receive payments via the local Q
QPNC’s Gateway Referral service can help you connect
payment systems, SEPA and BACS/ FPS, respectively. to a correspondent banking network that comprises
You can easily view deposit and withdrawal details more than 1,200 relationships in 115 countries.
through PINACLE.
Foreign Exchange Risk Management
PNC Bank Canada Branch (“PNC Canada”) PNC’s senior foreign exchange consultants can help
PNC Bank, through its full service branch in Canada, you develop a strategy to mitigate the risk of exchange
can help you succeed in this important market. rate swings so you can more effectively secure pricing
PNC Canada offers a full suite of products including and costs, potentially increasing profits and reducing
payables, receivables, lending, and specialized expenses.
financing to help streamline cross border operations.
We offer a comprehensive treasury management Trade Services
platform in Canada including U.S. dollar and Canadian PNC’s Import, Export, and Standby Letters of Credit
dollar accounts, payment initiation services (ACH, can deliver security and convenience, along with the
wire and check), receivables (A/R Advantage lockbox, backing of an institution with unique strengths in
branch deposits, electronic payments) and information the international banking arena. PNC also provides
reporting (with previous day through PINACLE®). Documentary Collections services to both importers
and exporters, helping to reduce payment risk and
Multibank Services control the exchange of shipping documents. We
PNC’s Multibank Services provide you with balances assign an experienced international trade expert to
and activity for all your accounts held with PNC and each account, so you always know your contact at PNC
other financial institutions around the world. PINACLE’s and receive best-in-class service. And PNC delivers it
Information Reporting module can give you a quick all to your computer through advanced technology,
snapshot of your international cash position, including resulting in fast and efficient transaction initiation and
U.S. dollar equivalent value, using indicative exchange tracking.
rates for all your account balances. You can also initiate
Multibank Transfer Requests (MT101s), and reduce the Trade Finance
time and expense associated with subscribing to a For more than 30 years, PNC has worked with the
number of balance reporting and transaction systems. Export-Import Bank of the United States (Ex-Im Bank)
and consistently ranks as a top originator of loans
Establish accounts in foreign countries backed by the Ex-Im Bank both by dollar volume and
Establishing good banking relationships in the number of transactions.

4
Disclosure
PNC, PNC Bank, ACHIEVEMENT, PINACLE, Working Cash, ActivePay, Global Trade Excellence, Vested Interest, Midland Loan
Services, Enterprise!, CMBS Investor Insight, Portfolio Investor Insight, Borrower Insight, Shared Servicing, PNC Riverarch Capital,
and PNC Erieview Capital are registered marks of The PNC Financial Services Group, Inc. (“PNC”). PNC Retirement Solutions is a
service mark of PNC.
Bank deposit, treasury management and lending products and services, foreign exchange and derivative products (including
commodity derivatives), and investment and wealth management and fiduciary services, are provided by PNC Bank, National
Association (“PNC Bank”), a wholly-owned subsidiary of PNC and Member FDIC. Certain fiduciary and agency services are
provided by PNC Delaware Trust Company.
Important Investor Information: Securities, insurance, foreign exchange, and derivative products are:
Not FDIC Insured • Not Bank Guaranteed • Not A Deposit

Not Insured By Any Federal Government Agency • May Lose Value
In Canada, PNC Bank Canada Branch, the Canadian branch of PNC Bank, provides bank deposit, treasury management, lending
(including asset-based lending) and leasing products and services. Deposits with PNC Bank Canada Branch are not insured by
The Canada Deposit Insurance Corporation or by the United States Federal Deposit Insurance Corporation.
Lending, leasing and equity products and services, as well as certain other banking products and services, require credit approval.
PNC does not provide legal, tax or accounting advice unless, with respect to tax advice, PNC Bank has entered into a written tax
services agreement.
©2022 The PNC Financial Services Group, Inc. All rights reserved.

5
Contents
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PNC’s International Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Financial Environment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Country Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Geographical Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Business Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Country Credit Rating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Economic Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Economics Table. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Sectoral Contribution as a % of GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Major Export Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Major Import Sources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Political and Economic Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Economics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Interest Rate Management Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Foreign Exchange Rate Management Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Major Economic Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Politics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Resident/Non-resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Tax Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Tax Year/Filing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Corporate Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Advance Tax Ruling Availability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Withholding Tax (Subject to Tax Treaties). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Tax Treaties / Tax Information Exchange Agreements (TIEAs) . . . . . . . . . . . . . . . . . . . . . . . . 18
Transfer Pricing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Interest Deduction Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Controlled Foreign Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Disclosure Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Anti-avoidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Earnings Stripping. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Stamp Duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Sales Taxes / VAT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Financial Transactions / Banking Services Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Share Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Cash Pooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Capital Gains Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Real Property Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Payroll and Social Security Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Cash Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Banking System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
JAPAN
6
Banking Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Banking Supervision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Central Bank Reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Exchange Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Bank Account Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Anti-money Laundering and Counter-terrorist Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Banking Sector Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Major Domestic Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Overall Trend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Payment Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
High-value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
High / Low-value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Low-value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Payment and Collection Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Overview and Trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Statistics of Instrument Usage and Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Paper-based. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Checks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Promissory Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Electronic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Credit Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Direct Debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Payment Cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ATM/POS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Electronic Wallet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Liquidity Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Short-term Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Overdrafts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Bank Lines of Credit / Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Trade Bills – Discounted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Factoring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Commercial Paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Bankers’ Acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Supplier Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Intercompany Borrowing, including Lagging Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Short-term Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Interest Payable on Bank Account Surplus Balances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Demand Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Time Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Certificates of Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Treasury (Government) Bills. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Commercial Paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Money Market Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Bankers’ Acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Liquidity Management Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Cash Concentration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Notional Pooling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Trade Finance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
General Rules for Importing/Exporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Imports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Documentation Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Import Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Import Taxes/Tariffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Financing Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Risk Mitigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Prohibited Imports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Exports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Documentation Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Financing Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Export Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Export Taxes/Tariffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Risk Mitigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Prohibited Exports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Information Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Electronic Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
External Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Long-term Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Bank Lines of Credit / Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Leasing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Private Placement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Asset Securitization / Structured Finance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Government Investment Incentive Schemes / Special Programs or Structures. . . . . . . . 44
Useful Contacts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
National Treasurers’ Association. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
National Investment Promotion Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Central Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Supervisory Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Payment System Operators. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Stock Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Ministry of Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Ministry of Economy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Chamber of Commerce. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Bankers’ Association. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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Financial Environment
Country Information
Geographical Information
Capital Tokyo
Area 377,915 km2
Population 126.0 million
Official language Japanese
Political leaders Head of state — Emperor Naruhito (since April 30, 2019)
Head of government — Fumio Kishida (since October 4, 2021)
Business Information
Currency (+ SWIFT code) Yen (JPY)
Business/Banking hours Business hours: 09:00–17:00 (Mon–Fri)

Banking hours: 09:00–15:00 (Mon–Fri), 09:00–12:00 (Sat)
Bank holidays 2022 – March 21, April 29, May 3–5, July 18, August 11, September 19, 23,
October 10, November 3, 23, December 31.
2023 – January 1–3, 9, February 11, 23, March 21, April 29, May 3–5,
July 17, August 11, September 18, 23, October 9, November 3, 23,
December 31.
Source: www.goodbusinessday.com.
International dialing code + 81
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Country Credit Rating

FitchRatings last rated Japan on August 11, 2021 for issuer default as:-
Term Issuer Default Rating
Short F1+
Long A
Long-term rating outlook Negative
Source: www.fitchratings.com, February 2022.
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Economic Statistics
Economics Table
2015 2016 2017 2018 2019
GDP per capita (USD) 34,211 38,586 38,372 39,150 40,014
GDP (JPY trillion) 530 537 547 549 554
GDP (USD billion) 4,379 4,939 4,873 4,972 5,082
GDP volume growth* (%) + 1.6 + 0.8 + 1.7 + 0.6 + 0.3
BoP (goods, services & income) as % GDP 3.4 4.2 4.4 3.9 3.9
Consumer inflation* (%) + 0.8 – 0.1 + 0.5 + 1.0 + 0.5
Population(million) 128 128 127 127 127
Unemployment(%) 3.4 3.1 2.8 2.4 NA
Interest rate (local currency MMR)†(%) 0.073 – 0.03 – 0.05 NA NA
Exchange rate‡ (JPY per USD)† 121.044 108.79 112.166 110.423 109.01
2021
2020
Q1 Q2 Q3 Q4
GDP per capita (USD) 39,919 – – – –
GDP (JPY trillion) 539 – – – –
GDP (USD billion) 5,049 – – – –
GDP volume growth* (%) - 4.8 - 1.8 + 7.3 + 1.2 NA
BoP (goods, services & income) as % GDP 3.7 – – – –
Consumer inflation* (%) + 0.0 - 0.4 - 0.1 - 0.7 NA
Population(million) 126.48 – – – –
Unemployment(%) NA 2.8 3.0 2.8 NA
Interest rate (local currency MMR)†(%) NA NA NA NA NA
Exchange rate‡ (JPY per USD)† 106.77 105.907 109.450 110.07 113.59
*Year on year. †Period average. ‡Market rate.
Sources: International Financial Statistics, IMF, February 2022 and 2020 Yearbook; and World Trade Organization.
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Sectoral Contribution as a % of GDP

Agriculture – 1.14%
Industry – 29.07%
Services – 69.31% (2018 estimate)
Major Export Markets

USA (19.0%), China (18.0%), South Korea (6.0%), Taiwan (6.0%)
Major Import Sources

China (23.0%), USA (11.0%), Australia (6.0%)
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Political and Economic Background
Economics
Interest Rate Management Policy
Japan’s benchmark interest rates are set through the BOJ. Its main objective is to maintain price
stability, as measured by the consumer price index. Benchmark interest rates are set by the policy
board of the BOJ, which meets once or twice monthly. The policy board’s independence from the
government is guaranteed by the Bank of Japan Law (revised 1998). The BOJ has responsibility
for the official discount rate (ODR), the money market rates, and the zaito rate, or Japanese
government bond (JGB) benchmark rate.
In January 2016, the BOJ adopted a negative interest rate policy, applying a rate of -0.1%, aimed at
achieving the government’s 2% inflation target. The impact of the coronavirus will make it difficult
for this to be acheived in the short term.
Foreign Exchange Rate Management Policy

Japan’s exchange rate is free floating, determined freely in the foreign exchange market against
all major currencies. The BOJ may intervene in the market to keep exchange rates consistent
with official policy and to counteract speculation. To this end, it works closely with the Ministry
of Finance (MOF). The Japanese Bankers’ Association compiles the Tokyo interbank offered rate
(Tibor) for the commercial lending rate regarding the JPY, Euroyen and Eurodollar.
Major Economic Issues

Japan’s economy contracted an annualized 3.6% in Q3. As an export-oriented economy, Japan has
been vulnerable to the supply chain challenges (especially of parts such as semiconductors) facing
manufacturers globally. In Q3, exports fell 2.1% from the previous quarter.
In December the government revised its growth forecast for 2022 upwards to a 3.2% (the IMF
estimates 3.3% growth) from 2.2%. However, it cut the GDP growth rate for 2021 from 3.7% to 2.6%.
In the same month, the government enacted a record JPN 36 trillion supplementary budget. The
budget will, in part, finance the country’s latest financial package, revealed in November, to help
the economy get back on track. Exceptional fiscal support combined with a drop in productivity
during the pandemic raised Japan’s debt-to-GDP ratio from 236% in 2019 to 259% in 2021.
Inflation rose 0.5% in December, the fourth consecturive monthly rise. In the same month, the BOJ
revised its projection on inflation risk from 0.9% to 1.1% for the fiscal year beginning April. This is
well below the 2% inflation target.
Japan’s unemployment rate was 2.7% in December, compared to 2.8% in November.
An IMF report released in January identified Japan’s ageing and declining population (in 2021, the
population declined 630,000) and low productivity growth as two of the main challenges facing
the economy over the long term.
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Politics
Government Structure
Political power is divided between the upper House of Councilors (Sangi-in) and the more
powerful lower House of Representatives (Shugi-in) in the National Diet (Kokkai) under the terms
of the Constitution of Japan.
There are 47 regional prefectures (including one metropolitan district – Tokyo), within which there
are also local municipal and district councils.
The Emperor is the head of state, but exercises limited power under the constitutional monarchy.
Executive
At national level, the Diet is headed by the prime minister, who is selected by the Diet. The prime
minister forms a government and appoints the cabinet, which must comprise a majority of its
ministers from the Diet.
The current administration is headed by Prime Minister Fumio Kishida of the Liberal Democratic
Party (LDP). Prime Minister Fumio took office on October 4, 2021 after the resignation of
Yoshihide Suga. The main opposition party is the Democratic Party of Japan (DPJ).
Legislature
At national level, the legislature has two houses.
The 242-member House of Councilors is elected either through multi-seat constituencies or

proportional representation. Members of the House of Councilors serve six-year terms and
elections for one half of the seats are held every three years, the most recent being in July 2019.
The next elections are due to be held in July 2022.
The 480-member House of Representatives is elected by a combination of single-seat

constituencies (300 seats) and proportional representation (180), in which the country is broken
down into 11 electoral voting blocs. Voters cast one ballot for an individual candidate in the
single-seat constituency, and one for a political party in the proportional representation election.
Elections to the House of Representatives must be held at least every four years.
A general election was held on October 31, 2021.
International memberships
Japan is a member of the Asia-Pacific Economic Cooperation (APEC) and a dialogue partner
with the Association of Southeast Nations (ASEAN). It is also a member of the Organisation for
Economic Cooperation and Development (OECD), the International Monetary Fund, the Bank for
International Settlements, and the World Trade Organization.
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Major Political Issues

A comfortable majority for the LDP in the elections held on October 31, secured Kishida, who took
office as the country’s new prime minister in the same month, a clear mandate to follow through
on election promises to spend trillions of yen to strengthen the economy. These include addressing
climate change (Japan has set a target of 2050 for becoming carbon-neutral and has pledged up
to USD 10 billion over five years to help Asia’s goal of zero carbon emissions) and shoring up the
country’s defences. The LDP has pledged to double defence spending to 2% of GDP.
The strength of Japan’s response to contain the impact of the pandemic has resulted in a lower
number of Covid-related deaths and infections than in may countries. However, tackling Covid-19
remains a priority for the government. The government has urged companies to encourage remote
working to help minimize the spread of the Omicron variant.
An unexpected consequence of the pandemic is that a fall in the number of marriages in

the country is likely to intensify the demographic problems posed by Japan’s rapidly ageing
population. More than 35% of the population will be 65 or over by 2050.
Trade tensions with South Korea remain. South Korea is demanding compensation from Japan for
its use of forced labor and the sexual abuse of Korean women during the Japanese occupation
of the Korean peninsula in the early 20th century. In November, Japan and South Korea’s vice
foreign ministers pulled out of a news conference with the US deputy secretary of state after a
disagreement over the Takeshima/Dokdo idlands, which South Korea administers but which are
claimed by Japan. However, despite strained relations, increased regional security threats such as
North Korea’s missile testing, have prompted both countries to look to deepen bilateral relations.
Japan is in dispute with China over ownership of the uninhabited Senkaku islands. China recently
passed legislation authorizing coast guard ships which it sends near the Senkakus to use weapons
against foreign ships it considers involved in illegal activities. In the opening paragraph of its
annual defense white paper published on July 13, attention was drawn to China’s attempts to
unilaterally change the status quo in the East and South China seas.
As China has expanded its influence in the region, Japan has sought to expand its military
cooperation beyond the relationship it enjoys with the USA. (At COP26, Kishida and President
Biden agreed to strengthen their bilateral alliance and work together for a ‘free and open Indo-
Pacific’ and in January the two leaders held an online meeting to discuss pressing economic and
security issues.) As such, Japan has tightened its relations with other Asia-Pacific nations. Japan is
also strengthening its ties with the Middle East.
Japan is also in dispute with Russia over territory off Hokkaido, known as the Northern Territories
in Japan and Southern Kurils in Russia. A recent increase in Russian military planes in airspace
north of Hokkaido and a visit by the Russian prime minister to the Northern Territories in 2021 have
done little to ease tensions between the two nations.
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Taxation
Resident/Non-resident
A company whose principal office or head office is located in Japan is considered to be a
Japanese resident, unless it is regarded as resident in another country under a Japanese double
tax treaty. Local management is not required.
Tax Authority
National Tax Agency (NTA).
Tax Year/Filing
A corporation selects its fiscal year when it begins operations in Japan. The accounting period must
not exceed 12 months. A branch’s tax year generally is the same as the tax year of its head office.
Companies must file a national and local corporation tax return within two months of the end of
their accounting period; however, a one-month extension may be available.
Companies may file either a blue or a white return. The blue return carries a wide range of privileges,
such as deductions, including tax loss carryforwards and accelerated depreciation. To use this form,
firms must apply before the beginning of the applicable tax year and must meet certain requirements
in relation to their accounting systems and recordkeeping.
Companies must file interim returns within two months of the end of the first six months of each fiscal
period, paying estimated tax on the basis of the income reported in the interim return. The estimated
tax paid with the interim return may be either (i) one-half of the total tax paid in the previous taxable
year, or (ii) the tax due on income resulting from the actual results of the first six months.
A Japanese domestic parent corporation and its 100% owned domestic subsidiaries may elect to file
a consolidated tax return for national tax purposes only, i.e. local taxation is calculated on a stand-
alone basis. Once such a group has been approved to enter into the consolidated tax regime, in
principle, the group cannot voluntarily revoke this status.
Consolidated taxable income is calculated for the consolidated group as a single tax unit, by aggregating
the separate taxable income of each subsidiary in the group and applying necessary adjustments.
Consolidated tax liability is calculated based on consolidated taxable income multiplied by the applicable
tax rate, adjusted for various tax credits. The group’s consolidated tax liability is allocated to the
individual corporations in the group based on the taxable income or loss of each corporation.
In principle, when forming/joining the consolidated group, existing subsidiaries are subject to the
mark-to-market rule, and the separate return limitation year rule (under which a subsidiary’s net
operating losses [NOLs] incurred before joining the group can be carried forward and offset only
against its own taxable income). There are some exceptions to these rules for subsidiaries held for
more than five years and subsidiaries that meet certain requirements.
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16
Corporate Taxation
A resident corporation is taxed on its worldwide income; a foreign corporation generally is taxed only
on certain Japan-source income. However, if a foreign corporation has a permanent establishment
(PE) in Japan, any income attributable to the PE is taxable. The corporate tax rate for a branch is the
same as for a subsidiary.
The national standard corporation tax rate of 23.2% applies to ordinary corporations with share
capital exceeding JPY 100 million.
Companies also must pay local inhabitants tax, which varies with the location and size of the
firm. The inhabitants tax, charged by both prefectures and municipalities, is comprised of the
corporation tax levy (levied as a percentage of national corporation tax) and a per capita levy
(determined based on capital and the number of employees).
The local enterprise tax, another tax imposed by the prefectures, is classified as an income-based and
factor-based tax. The factor-based enterprise tax has three components: progressive rates of up to
3.6% of taxable profits, 1.2% of a ‘value-added’ factor and 0.5% of share capital and capital surplus.
The effective tax rate for corporations (inclusive of the inhabitants and local enterprise taxes), based
upon the maximum rates applicable in Tokyo to a company whose paid-in capital is over JPY 100
million, is approximately 30%.
There is no alternative minimum tax.
A 2.1% surtax applies on the withholding tax for certain Japan-source income.
Dividends received by a resident corporation from another resident corporation are entirely excluded
from taxable income for corporation tax purposes if the recipient holds 100% of the dividend-paying
corporation for a certain period. If a corporation owns 33.3% or more of the shares in a dividend-
paying corporation for at least six months before the date when the right to receive a dividend
is determined, the dividend (less the dividend-receiving resident corporation’s interest expense
allocated to the dividend) would be excluded from taxable income. If a corporation holds less than
33.3% of the shares but more than 5% of the shares, or holds 33.3.% or more but for less than six
months before the dividend determination, 50% of the dividend is excluded from taxable income. If a
corporation owns 5% or less of the shares, 20% of the dividend is excluded from taxable income.
A foreign dividend exemption systems exempts 95% of dividends received by a Japanese

company from its qualifying shareholdings of 25% or more in foreign companies that have been
held for at least six months before the dividend determination date. However, foreign dividends
that are deductible in the source country are excluded from the exemption and are fully includable
in taxable income.
Only 50% of a company’s taxable income may be offset by NOLs. Small and medium-sized
enterprises (SMEs) with share capital of not more than JPY 100 million are exempt from the NOL
restrictions, unless the SMEs are owned by a large corporation. NOL carryforwards may be further
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restricted in certain situations, including a change of ownership of more than 50% in connection
with a discontinuation of an old business and commencement of a new business.
The NOL carryforward period is ten years for NOLs incurred during fiscal years ended on or after
April 1, 2018. SMEs may carry back losses for one year.
Various tax credits are available, including an R&D credit. Tax incentives are available for increasing
wages and salaries for fiscal years starting between April 1, 2018, and March 1, 2021.
The R&D credit and certain other tax incentives are not available to large corporations that do not
satisfy certain conditions for fiscal years that start between April 1, 2018, and March 1, 2021.
Advance Tax Ruling Availability

Japan has a limited advance ruling system. Written rulings generally are available to the public and
the availability of a ruling is subject to certain restrictions (e.g. no hypothetical cases).
Withholding Tax (Subject to Tax Treaties)

Payments to: Interest Dividends Royalties Other Branch
income Remittances
Resident companies 0% 20%** 0% 0% NA
Non-resident
15%/20%* 15%/20%** 20%*** 20%*** None
companies ***
* A 2.1% surtax increases the rates to 20.42% and 15.315%.
** A 20% withholding tax is levied on dividends paid to residents and to non-residents unless reduced under a tax treaty, The rate is
15% for dividends paid by a listed company to a non-resident. A 2.1% surtax increases the rates to 20.42% and 15.315%.
*** A 2.1% surtax increases the rates to 20.42%.
Tax Treaties / Tax Information Exchange Agreements (TIEAs)

Japan has concluded 78 income tax treaties.
The OECD MLI entered into force for Japan on January 1, 2019.
Transfer Pricing
The prices of goods and services exchanged between internationally affiliated entities must
be consistent with arm’s length principles. Internationally affiliated entities are defined, among
others, as those with a relationship consisting of a direct or indirect foreign shareholding of 50%
or more, or a “control in substance” relationship. The burden is on the taxpayer to demonstrate
that the pricing is reasonable. Failure to do so may give rise to a transfer pricing adjustment, at
the discretion of the tax authorities. Advance pricing agreements on the reasonableness of the
taxpayer’s methodology and results may be obtained from the tax authorities.
Japan has adopted a three-tiered approach to transfer pricing documentation – country-by-

country (CbC) reporting, a master file and a local file – which is consistent with action 13 of the
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OECD BEPS project. The master file and Notification for Ultimate Parent Entity must be submitted
annually for groups with prior year revenue equal to or greater than JPY 100 billion.
New hard-to-value intangibles (HTVI) rules apply for income years beginning on or after April 1 ,
2020.
As from income years beginning on or after April 1, 2020, the discounted cash flow method is
formally allowed as a pricing method, and the statute of limitations relating to transfer pricing is
extended to seven years from six.
Interest Deduction Limitations

Japan’s thin capitalization rule primarily restricts the deductibility of interest payable (including
certain guarantee fees) by a Japanese corporation, and a foreign corporation liable to pay
corporation tax in Japan, to its foreign controlling shareholder (or certain third parties) if
the interest is not subject to Japanese tax in the hands of the recipient. A foreign controlling
shareholder is defined as a foreign corporation or non-resident individual that:
QQ directly or indirectly owns 50% or more of the total outstanding shares of the Japanese
corporation (i.e. a parent-subsidiary relationship);
QQ is a foreign corporation in which 50% or more of the total outstanding shares are directly or
indirectly owned by the same shareholder that directly or indirectly owns 50% or more of the
shares of the relevant Japanese entity (i.e. brother-sister relationship); or
QQ otherwise exercises control over the Japanese entity.
This rule also is applicable in situations involving certain third parties, including situations where:
QQ a third party provides a loan to the Japanese entity that is funded by a back-to-back loan
arrangement with the foreign controlling shareholder;
QQ a third party provides a loan to the Japanese entity that is guaranteed by a foreign controlling
shareholder; or
QQ a third party provides a loan to the Japanese entity based on arrangements involving bonds
and certain repo transactions.
There is a debt-to-equity safe harbor ratio of 3:1 (2:1 for certain repo transactions). This effectively
means that there will be a restriction only if the debt from the foreign controlling shareholder (or
specified third party) exceeds three times the amount of net equity the shareholder/third party
owns and the total debt exceeds three times the equity. In such a situation, interest expenses
calculated on the excess debt are treated as non-deductible expenses for Japanese corporate
income tax purposes. If the taxpayer can demonstrate the existence of comparable Japanese
corporations that have a higher debt-to-equity ratio, that higher ratio may be used.
Controlled Foreign Companies

Japanese companies that hold (together with their associated persons) 10% or more of the
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outstanding shares of a controlled foreign company (CFC) generally is taxed on its pro rata share
of the CFC’s taxable profits.
A CFC may include any non-Japanese company that has an effective tax rate of less than 20% and
any “paper”, “cash box” or “black listed” company that has an effective tax rate of less than 30%,
where the company is more than 50% controlled, directly or indirectly, by Japanese shareholders.
A CFC is considered “controlled” by Japanese shareholders where Japenese shareholders own
directly or indirectly more than 50% of the outstanding shares. For fiscal years of CFCs starting on
or after April 1, 2018, the definition of controlled is expanded to include companies controlled in
substance, regardless of the number of shares owned.
The CFC rules may be waived for a foreign company with an effective tax rate of less than 20%
where it has fixed facilities engaged in business in the foreign country and conducts business
activites in that country. Even if a CFC satisfies the above conditions, certain passive income is
subject to tax in the hands of the Japanese parent company. The inclusion of taxable profits from
paper, cash box and black listed CFCs cannot be waived.
Disclosure Requirements
Disclosure requirements apply to the 10%-or-more shareholders of CFCs. Transactions with foreign
related parties should be disclosed (on Form 17(4)) and submitted with the tax return.
Anti-avoidance
Broadly applicable anti-avoidance rules are in place.
Earnings Stripping
Where net interest payments to related persons (i.e. interest payments to related persons, less
relevant interest income) exceed 50% of adjusted taxable income in a fiscal year, the excess
portion is non-deductible. For these purposes, “related persons” is broadly defined, and includes
similar controlling and affiliate relationships to those discussed under “Interest Deduction
Limitations.” The rules also can apply to interest payments to certain third parties (e.g. where
a third party provides a loan that is guaranteed by a related person). To summarize, “adjusted
taxable income” is taxable income without applying certain provisions (including offsetting
brought-forward tax losses, the dividends received deduction, the foreign dividend exemption,
etc.), and adding back net interest payments to related persons and certain other expenses. De
minimis exceptions to the application of the earnings stripping rules exist for:
QQ net interest payments to related parties not exceeding JPY 20 million, or
QQ aggregate interest payments of a japanese group that are not more than 20% of the group’s
adjusted income.
Where both the earning stripping and the thin capitalization rules are applicable, the larger of the
two potential disallowances will apply. To the extent the application of the above rules gives rise to
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non-deductible related party interest, such interest expense may be carried forward and deductd
(within the limitation) against taxable income arising during the following seven fiscal years.
Stamp Duty
Stamp duty of JPY 200 to JPY 600,000 is imposed on the execution of taxable documents.
Sales Taxes / VAT

Japanese consumption tax (JCT), similar to a European-style VAT, is levied on all taxable goods
and services and on all taxable goods imported into Japan.
The national and local rate is 10%; (a reduced rate of 8% applies for certain items and on certain
newspapers issued more than twice a week (i.e. those based on subscriptions)). Consumption tax
rate-qualified invoices are required until September 30, 2023; thereafter an EU VAT-type invoice
will be required.
An existing company may elect to be a consumption taxpayer if taxable sales for consumption tax
purposes do not exceed JPY 10 million in the “base period” (two years before the current year, or
the first six months of the prior year), subject to certain other conditions. A new company with
share capital of less than JPY 10 million should be automatically exempt from filing consumption
tax returns until taxable sales exceed JPY 10 million in the base period or a timely consumption
taxpayer election is filed. The election is binding for two taxable years. Other than this election, no
registration procedures exist.
Financial Transactions / Banking Services Tax

There is no specific financial transactions tax. Stamp duty could be applicable to certain documents.
Share Registration
Share registration tax is assessed on the registration of new or additional share capital, at 0.7%.
Cash Pooling
There are no specific tax rules relating to cash pooling arrangements.
Capital Gains Tax

Capital gains are taxable as ordinary income. Capital losses generally are deductible.
Real Property Tax

The municipal fixed assets levy is assessed at an annual rate of 1.4%. A real estate acquisitions tax
of 3–4% (temporarily 1.5-2% through March 31, 2021) of the assessed value applies at the time land
or buildings are acquired, and a real estate registration tax is imposed on the assessed value of real
property at rates ranging from 0.4% to 2%, depending on the type of transfer.
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Payroll and Social Security Taxes

There is no payroll tax payable by employers.
All Japanese companies, including subsidiaries of foreign companies, are “resident employers”.
Non-Japanese companies may also be resident employers if they have an office in Japan. Resident
employers are required to withhold payroll and social security taxes at source.
The employer must withhold the employee’s contribution and make its own contributions to
social security tax, which has several components. The highest combined employer portion is
approximately 16.242%. The highest combined employee’s portion is approximately 15.28%.
The employer’s contribution is deductible for corporation tax purposes.

All tax information supplied by Deloitte Touche Tohmatsu and Deloitte Highlight 2021 (www.deloitte.com).
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Cash Management
Cash Management
Banking System
Banking Regulation
Banking Supervision
Central bank
The Japanese central bank is the Bank of Japan (BOJ). It was established in 1882 and is based
in Tokyo. Its authority derives from the Bank of Japan Act and its relevant amendments.
Approximately 55% of the BOJ is owned by the Ministry of Finance (MOF).
Within Japan, it is the banker to the government and to other banks. It issues currency, manages
Japan’s monetary reserves, sets and implements monetary policy and supports Japan’s
government economic policy. Within the BOJ, the main objective is to maintain price stability.
Other banking supervision bodies

Bank supervision is performed by the Financial Services Agency (FSA), which is also responsible
for supervising insurance companies and securities firms.
Central Bank Reporting

General
Japan does apply some central bank reporting requirements. These are managed by the BOJ on
behalf of the MOF, according to the rules set out in the Foreign Exchange and Foreign Trade Law
(revised 2005) and relevant regulations.
What transactions – listed

Transactions in the following categories must generally be reported ex post facto monthly to
the BOJ:
QQ all non-trade related transfers between resident and non-resident bank accounts with a value
equal to or above JPY 30 million (or its foreign currency equivalent);
QQ all capital transactions (i.e. loans, credits) between resident and non-resident bank accounts
with a value equal to or above JPY 100 million. Non-residents maybe subject to other reporting
requirements if capital transactions exceed JPY 100 million.
Whom responsible
The resident entity is ultimately responsible for the transmission of the required information to
the BOJ.
Companies can provide the information directly to the BOJ through an internet-based reporting
system (BOP System) whose software is provided by the central bank.
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Cash Management
Additional reporting for liquidity management schemes

There are no additional reporting requirements. Netting and other cross-border settlements no
longer require permits.
Exchange Controls
Exchange structure
Japan has a unitary exchange structure.
Classification
Japan has a free floating currency whose exchange rate is determined freely in the foreign
exchange market against all major currencies.
Exchange tax
There is no exchange tax.
Exchange subsidy
There is no exchange subsidy.
Forward foreign exchange market

There are no restrictions on forward foreign exchange markets.
Capital flows
In May 2020, revisions to the Foreign Exchange and Foreign Trade Act (FEFTA) came in to effect.
The amended Act introduced an exemption scheme for prior notification for stock purchases
and lowered the threshold of inward direct investment in designated industries that require prior
notification to 1% from 10%.
Prior declaration is required for outward direct investment in certain industry sectors such as arms
manufacturing, narcotics, leather products and fisheries. Prior declaration is required for inward
direct investment in certain industry sectors, including agriculture, oil, mining, leather products and
air or maritime transportation.
Loans, interest and repayments

There are no controls on the provision of loans by commercial banks.
Royalties and other fees

There are no restrictions.
Profit remittance
There are no restrictions on the remittance of profits into or out of Japan.
Bank Account Rules

Resident entities are permitted to hold fully convertible foreign currency bank accounts
domestically and outside Japan.
Non-resident entities are permitted to hold fully convertible domestic and foreign currency bank
accounts within Japan.
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Cash Management
To open a bank account, a company must supply a copy of its registration documents along with
the appropriate account opening documentation. Account opening documentation can also be
completed in English.
Anti-money Laundering and Counter-terrorist Financing

QQ Japan has implemented anti-money laundering and counter-terrorist financing legislation,
(the Act on Special Provisions for the Narcotics and Psychotropics Control Act, etc, and
Other Matters for the Prevention of Activities Encouraging Illicit Conduct and Other Activities
Involving Controlled Substances through International Cooperation (Act No. 94 of 1991) (the
Anti-Drug Special Provisions Act); the Act on Punishment of Organized Crimes and Control of
Crime Proceeds (Act No. 136 of 1999) (the Act on Punishment of Organized Crimes); and the
Act on Prevention of Transfer of Criminal Proceeds (Act No. 22 of 2007).
QQ A Financial Action Task Force (FATF) member, Japan observes most of the FATF-49 standards.
Japan is also a member of the Asia-Pacific Group on Money Laundering (APG) and has
observer-jurisdiction status on the Council of Europe’s MONEYVAL Committee.
QQ Japan has a financial intelligence unit (FIU), the Japan Financial Intelligence Centre (JAFIC),
housed within the National Police Agency, which is a member of the Egmont Group.
QQ Account opening procedures require formal identification of the account holder and (for legal
entities) beneficial owners.
QQ Financial institutions have to identify clients for domestic or international transactions, large
cash transactions exceeding JPY 2 million, and cash remittance exceeding JPY 100,000.
QQ If a transaction involves a transfer of property of a value exceeding JPY 2 million, the status of
the property and income must be verified.
QQ Financial institutions in the broadest sense must record and report suspicious transactions to
the JAFIO.
QQ Businesses must also report all foreign currency exchanges exceeding JPY 1 million per month.
QQ All individuals entering and departing Japan must report physically transported currency
and monetary instruments (including securities and gold weighing more than one kilogram)
exceeding JPY 1 million, or its equivalent in foreign currency, to the customs authorities.
QQ Customer identification records must be maintained for at least seven years.

Data as at January 2022.
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Cash Management
Banking Sector Structure

Major Domestic Banks
Total assets (USD million)
Bank
March 31, 2021
MUFG Bank 2,349,071
Sumitomo Mitsui Banking Corp 2,060,752
Japan Post Bank 2,022,839
Mizuho Bank Ltd 1,797,060
The Norinchukin Bank 972,679
Sumitomo Mitsui Trust Bank 559,715
Shinkin Central Bank 396,159
Resona Bank 364,292
Mitsubishi UFJ Trust and Banking Corporation 288,457
Source: www.accuity.com.
Overall Trend
Japan 33 city banks, including five large city banks – Mizuho, Mitsubishi
UFJ, Sumitomo Mitsui,
Resona and Saitama Resona – and 13 trust banks. There are 16 ‘other’ banks which include Japan
Post Bank and Minna, the new digital bank. new There are 62 first tier regional banks and 37
second tier banks. Forty-eight foreign banks operate in Japan. Japan’s first digital bank, Minna,
launched operations in May 2021. The bank’s services are accessible via smartphone only.
The FSA has introduced special measures to protect strong regional banks investing in regional
banks with weaker capital adequacy ratios (the rules aim to prevent a stronger bank seeing its
capital adequacy ratio going below 4%, the minimum level required by law to operate in Japan). In
November 2020, a special measure came into law granting exceptions to the anti-monopoly law,
to try to promote mergers of regional banks to support the struggling regional bank sector. Other
measures to aid regional banks include: FSA plans to establish a subsidy program to facilitate
realignments among regional banks; and the payment of additional interest on deposits held at
the BOJ by regional banks working to improve their earning via cost cutting measures or business
integration.
Japan’s banks are transforming their operations by promoting digitalization and reducing their
branch networks.
The amendment to the Payment Services Act (PSA) of Japan took effect in May 2021. The PSA
removes the current numerical cap placed on fund transfer services by non-bank instutitutions.
This decision could prompt new non-bank entities to enter into traditional banking services.
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Cash Management
Payment Systems
Overview
Japan’s four main interbank payment clearing systems are BOJ-NET, FXYCS, Zengin and the BCCS.
BOJ-NET is the country’s real-time gross settlement system, used for high-value and urgent
electronic interbank payments. Operated by the BOJ, it also settles the net positions resulting
from Japan’s private sector deferred net settlement systems.
The Foreign Exchange Yen Clearing System (FXYCS), operated by the Japanese Bankers’
Association, is the country’s main RTGS clearing system for foreign exchange transactions and
payments involving non-residents. Both legs of a foreign exchange transaction can also be
processed through Continuous Linked Settlement (CLS). There are eight Japanese banks that are
Settlement Members of CLS Bank – Mizuho Corporate Bank, Daiwa Securities Group, Sumitomo
Mitsui Banking Corp, Sumitomo Mitsui Trust Bank, Norinchukin Bank, Nomura, Mitsubishi UFJ Trust
and Banking and Bank of Tokyo-Mitsubishi UFJ.
The Zengin Data Telecommunications System (Zengin System) is the country’s primary retail
payments clearing system. Operated by the Japanese Banks’ Payment Clearing Network
(Zengin-Net), Zengin processes the majority of non-urgent and low-value electronic payments
denominated in JPY (except for those involving non-residents). In 2018, the Zengin System
launched its More Time System, which operates 24/7/365. Participation in the More Time System
is voluntary for participants of the Zengin System.
The Bills and Checks Clearing System (BCCS) is the paper-based clearing system for Japan and is
a network of regional clearing houses owned by local bankers’ associations.
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Cash Management
High-value
Name of system BOJ-NET
Settlement type Real-time gross settlement
Settlement cycle Payments are settled on a same-day basis with immediate finality.
Links to other systems Interface connects to Zengin System, routing large value payments
to BOJ-NET for real-time settlement.
Payments processed High-value (greater than JPY 100 million) and urgent domestic
electronic payments. It also provides final settlement for the net
positions of transactions arising from the FXYCS, Zengin and BCCS.
Currency of payments JPY

processed
Value and other limits to There are no value thresholds.

processing
Operating hours 08:30–21:00 for all participants (07:30 on the last business day of
each month).
System holidays The system is open on all Japanese business days.
Cut-off times Final settlement for BCCS net positions is 17:00.

Final settlement for FXYCS net positions is 15:00.
Final settlement for Zengin net positions of payments under JPY 100
million is 16:30.
Participants 496 direct participants
Access to system Through a dedicated bank terminal or a direct link to the BOJ’s
computer network.
Future developments NA
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Cash Management
High / Low-value
Name of system Foreign Exchange Yen Clearing System (FXYCS)
Settlement type Real-time gross settlement
Settlement cycle Payments are settled on a same-day basis with immediate finality
through the RTGS mechanism.
Links to other systems NA
Payments processed All JPY legs of cross-border electronic payments, including import
and export settlement payments. All JPY transactions involving non-
residents and JPY-denominated bond transactions.

processed
Value and other limits to The system places sender net debit caps on each participant based
processing on the system’s risk exposure to that participant.
Operating hours 08:30-15:00 Simultaneous Settlement Payment Instructions

08:30-21:00 Ordinary Settlement Payment Instrunctions
09:00-15:00 Exchange hours for payment instructions
Cut-off times 14:00
Participants 27 direct participants and 170 indirect participants
Access to system Data format is similar to SWIFT.
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Cash Management
Low-value
Name of system Zengin Data Telecommunications System
Settlement type Designated time net settlement
Settlement cycle Payments below JPY 100 million are made by 15:30 are settled
via the BOJ at 16:15. Payments of JPY 100 million and above are
submitted for settlement to BOJ-NET on a real-time basis.
Links to other systems Interface connects to BOJ-NET to route large value payments for
real-time settlement.
Payments processed Low-value and non-urgent domestic electronic payments, both

single retail transactions and bulk electronic credits between resident
accounts.

processed
Value and other limits to The system places sender net debit caps on each participant based
processing on the system’s risk exposure to that participant.
Operating hours 08:30–15:30 for all participants (07:30–16:30 on the last business day
of each month).
The More Time System has extended operating hours, enabling
intraday interbank funds transfers of less than JPY 100 million to be
made to the account of the receiving bank on a real-time basis 24
hours a day, 365 days a year.
Cut-off times Payments for designated time net settlement must be submitted by
15:30.
Participants 1,160 participants (30,090 branches)

1,143 More Time System participants
Access to system Companies with access to the automatic Answer Network System for
Electronic Requests (ANSER) can make funds transfers in real time
between resident JPY accounts via Zengin.
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Cash Management
Name of system Bills and Checks Clearing System (BCCS)
Settlement type Designated time net settlement
Settlement cycle There is one daily processing cycle. Net positions are settled daily
at 12:30 via BOJ-NET transfers. Access to cleared funds is usually
available after 13:00 on the day following interbank settlement.
Links to other systems NA
Payments processed All paper-based instruments, including checks and promissory notes

processed
Value and other limits to There are no value thresholds.

processing
Operating hours NA
Cut-off times Net positions are settled via BOJ-NET at 12:30.
Participants Tokyo Clearing House has 298 participants, 104 direct and 194
indirect.
Access to system Banks send checks to clearing houses via post.
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Cash Management
Payment and Collection Instruments
Overview and Trends

The preference for cash in Japan, remains strong; government statistics indicate that it has a
cashless ratio below 20% (versus 96% in South Korea, for example). The most important cashless
payment instruments in Japan are credit transfers in terms of value and, in terms of volume, card
based electronic e-money and payment cards. Checks are primarily used for business-to-business
transactions, while direct debits are widely used among individuals and businesses to make regular
payments.
Statistics of Instrument Usage and Value

Traffic (value)
Transactions (million)
% change (JPY trillion) % change
2019 2020 2020/2019 2019 2020 2020/2019
Checks 48 41 - 14.6 184 134 - 27.2
Debit cards 378 525 38.9 2 2 0.0
Credit transfers 1,691 1,765 4.4 2,931 2,958 0.9
Card-based e-money 7,049 8,641 22.6 7 10 42.9
Source: Bank for International Settlements, CPSS – Red Book statistical update, November 2021.
Paper-based
Checks
The volume of checks processed is in steady decline. Rarely used by consumers, the main users
tend to be companies, typically for supplier payments and other business-to-business transactions.
According to Japanese law, all financial institutions must freeze all current account and lending
transactions with a payer for two years if the payer dishonors a check or promissory note twice
within six months.
Promissory Notes
Despite the overall decrease in the use of paper-based instruments, promissory notes are still a
popular payment method between Japanese companies. Promissory notes typically come due in
either a few weeks or 90-120 days. There is an active discount note market, which allows recipients
of promissory notes access to working capital finance.
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Cash Management
Electronic
Credit Transfer
Credit transfers are the main form of payment instrument used by companies to pay suppliers
and salary payments. They are also used to make tax and benefit payments, and in treasury
operations. Due to a lack of personal check writing, credit transfers are also popular with
individuals, and the number of credit transfers used continues to increase along with the growth
in personal internet banking.
High-value
High-value and urgent credit transfers are processed through BOJ-NET, except if they involve non-
residents or arise from cross-border payments, in which case they are handled through the FXYCS.
Customer and interbank payments must be submitted by 21:00 to be settled on a same-day basis.
All payments settled through BOJ-NET are done so with immediate finality.
High-value and urgent cross-border electronic payments that are not handled via the FXYCS are
processed through correspondent bank networks. Most banks have direct access to SWIFT.
Low-value
Non-urgent and low-value credit transfers are processed through the Zengin System. Most
payments are processed to be settled on a same-day basis.
Low-value cross-border transfers are processed via the FXYCS. Japan Post and Postal Savings
Business Headquarters are members of Eurogiro, which is a postal bank and office cooperative
concentrating on low-value cross-border payments. Through an agreement with SWIFT, Eurogiro
can act as an administrator for payment transactions between Eurogiro members using SWIFTNet,
under a closed user group (CUG) set-up. This permits members to exchange FileAct and other types
of exchanges between themselves or with non-SWIFT members of Eurogiro via the Eurogiro hub.
The MoneyTap system, launched by the Japan Bank Consortium (61 member banks), is based on
blockchain technology, and enables real-time settlement for domestic payments in JPY or foreign
currency 24/7/365 via a mobile app.
Direct Debits
There is no uniform direct debit scheme in Japan and, as such, each direct debit relationship must
be established independently. A company must send a request to its agent bank, which then in
turn requests to establish a direct debit with the payer’s bank at the designated collection bank.
Despite the complicated collection procedures, direct debits are increasingly popular with both
individuals and companies when making regular payments, such as mortgage or utility payments.
Payment Cards
Though the Japanese have been slower to adopt credit and debit cards for payment purposes,
their usage has increased rapidly. At the end of 2020, there were approximately 456 million
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Cash Management
debit cards in circulation. In the three months to September 2021, there were 163 million debit
card transactions totaling JPY 692 billion, a year-on-year increase of 21% and 19.4% respectively.
There are more than 295 million credit cards in circulation. Contactless cards are growing rapidly
in popularity because they do not require authorization by signature or PIN, enabling quicker
payments.
The Credit and Finance Information System (CAFIS) carries out the data processing for both credit
and debit cards, connecting retailers with credit card companies or debit card customers’ banks.
Payments are cleared via Zengin or other clearing houses after two business days. Funds are
received after three days.
ATM/POS
There are approximately 134,000 ATMs in Japan. The number of ATMs is falling as online and
digital payments increase.
Approximately 90% of Japan’s 1.9 million POS terminals are now enabled to accept smart cards
with EMV technology.
The National Cash Service (MICS), a CD/ATM network between banks, is operated by the Japanese
Bankers Association. The MICS links the following networks: BANCS (city banks), ACS (regional
banks), SOCS (trust banks, LONGS (long-term credit banks and Shoko Chukin Bank), SCS
(member banks of the Second Association of Regional Banks), SNCS (shinkin banks), SANCS
(credit cooperatives), ROCS (labor banks) and Agricultural Cooperative Net Service.
Electronic Wallet
Electronic money schemes in Japan have expanded rapidly in recent years; there are
approximately 468 million e-money instruments in circulation (49 million mobile phones have
e-money functionality). There are approximately 5.9 million e-money terminals. Many mobile
payment schemes are available, including Rakuten Pay, Apple Pay, LINE Pay, PayPay and Google
Pay. SoftBank Group plans to merge its PayPay app, which has 36 million users, with the Line Pay
app, which has 39 million users, in April 2022 as a result of its merger with Line Corp in March
2021. In 2020, the volume and value of e-money transactions decreased 5.0% to 5,923 million on
2019. Value increased 4.9% to JPY 6.0 trillion.
Although the total value of electronic money remains small compared to some payment
instruments, in terms of volume they are now the most widely used cashless payment instrument,
due to a sharp increase in the uptake from merchants in recent years. The government has set
a target of doubling the percentage of cashless payments to over 40% by 2025 to reduce the
country’s dependency on cash, and has introduced a 5% rebate program for users of cashless
payments in small shops and convenience stores. Partly in response to this, the use of QR code
payment schemes such as PayPay and Line Pay has increased. In 2020, the JPQR unified code for
payments was rolled out nationally. The JPQR standard is compatible with 11 QR codes.
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Cash Management
J-Coin Pay is a cashless payment system developed by Mizuho Bank. J-Coin Pay digital wallet
payments are processed via an app using a QR barcode, a phone number or a Line messenger
personal ID number. J-Coin Pay enables users to make payments, send and receive transfers on
their smartphones. Users are also able to move funds between their J-Coin Pay accounts and
deposit accounts for free, anytime and anywhere.
Twenty-three providers of cashless payment services have registered to participate in a

government-led reward-point program for holders of My Number social security and tax
identification cards. In a move aimed at increasing the use of cashless payments, the government
offers reward points to holders of My Number cards for topping up smartphone payment services.
The most common pre-paid card schemes in operation are:
QQ Edy – a stored-value money card scheme that is accepted in convenience stores, fast food or
restaurant chains, and on online shopping websites via a special card reader called Pasori. The
card can be reloaded and stores a maximum value of JPY 50,000.
QQ WAON and Nanaco mobile phones and prepaid cards are popular payment methods. There are
over 87 million WAON cards in circulation and is accepted at over 840,000 stores throughout
Japan. Nanaco, which has issued around 74 million Nanaco cards, is available in Japan’s 7
Eleven stores. By end-2021, both prepaid cards will support Apple Pay.
QQ Suica, ICOCA, SUGOCA, Kitaca and PASMO are the most commonly used smart cards for travel
on Japan’s transport infrastructure.
QQ densai.net is an electronic monetary claim service, operating as an e-money alternative to bills,

notes and credit transfer payments made to businesses. It is increasingly used for transfers
to larger businesses, with over 500 financial institutions and 260,000 businesses already
participating in the service.
Banking group Resona Holdings Inc, Panasonic System Solutions Japan Co, credit card firm
JCB Co and Dai Nippon Printing Co are developing a payment system using facial recognition
technology that will enable customers to make deposits and withdrawals at banks and shops.
JAPAN
35
Cash Management
Liquidity Management
Short-term Borrowing
Overdrafts
JPY and foreign currency overdrafts are commonly used by companies with good credit standing.
Through persistent use along with associated short-term loans, overdrafts form a core part of
companies’ funding.
Interest charged for overdrafts is higher than for discounted bills.
Bank Lines of Credit / Loans

Short-term advances of up to six months are a common method of corporate funding from the
City banks.
Foreign currency denominated impact loans are available, at variable rates with TIBOR, TONAR or
Japanese prime lending rates. JPY LIBOR rates will not be available after December 31, 2021.
Interest charged is at a margin over reference rates: TONAR and TIBOR.
Collateral taken includes accounts receivables, property, securities and inventory, and through bill
discounting (see below).
Trade Bills – Discounted

Bill discounting is available and used, but is bureaucratic because of the level of supporting
documentation required. Where used, funding is available for terms from one week to a year.
Factoring
The majority of commercial banks in Japan have set up affiliated companies or departments for
dealing with the factoring of receivables, which are often used as security for short-term advances.
If used, factoring is mostly disclosed.
Commercial Paper
Companies issuing commercial paper (CP) need a minimum of an A3 credit rating or must be
guaranteed by a financial institution. Back-up credit lines are not required if the rating agency
determines so.
Tenors are less than one year year. The minimum issue size is JPY 100 million.
Japanese companies can only issue JPY-denominated CP, which is issued through dealers or
directly to investors who traditionally hold to maturity.
Foreign companies can issue Euro-yen notes overseas and JPY-denominated (samurai) CP in Japan.
JAPAN
36
Cash Management
Bankers’ Acceptances
Bankers’ acceptances are not used.
Supplier Credit
Supplier credit is available.
Intercompany Borrowing, including Lagging Payments

Trade bills are sometimes used to facilitate intercompany lending.
Short-term Investments
Interest Payable on Bank Account Surplus Balances
Interest-bearing current, or checking, accounts are usually not available. However, the sweeping of
surpluses balances into interest-bearing overnight accounts is feasible, subject to legal advice.
Demand Deposits
Interest-bearing demand, or sight, deposit accounts are available to both resident and non-
resident entities in JPY and foreign currency.
Time Deposits
Time deposits are popular short-term investment instruments in Japan. Banks offer them for terms
up to five years. Foreign currency accounts usually offer higher interest rates than is currently
available with JPY-denominated deposits.
Certificates of Deposit
Certificates of deposit (CDs) are used as investment instruments in Japan by private companies.
They are available usually for maturities of three months, although terms of between one day and
five years are possible. CDs pay a fixed interest rate. There is an active secondary market.
Treasury (Government) Bills

Treasury discount bills (T-bills) are issued by the Japanese government and can only be held by
corporations. They are issued for maturities of three, six and twelve months through bi-monthly
auctions. T-bills of JPY 10,000 are issued to retail investors with a three-year fixed-rate, five-
year fixed-rate and ten-year floating-rate.
Commercial Paper
Commercial paper is a popular form of short-term investment in Japan. Japanese companies issue
commercial paper for terms of up to a year though maturities of three months are the most common.
The minimium investment is JPY 100 million.
Individuals can also invest in commercial paper.
JAPAN
37
Cash Management
Money Market Funds

Money market funds are available and remain popular despite Japan’s negative interest rates.
Repurchase Agreements
Repurchase agreements (repos) are available as a short-term investment instrument in Japan.
There are two forms of repo commonly used in Japan. A gentan repo is a cash-collateralized
securities loan providing repo functionality, governed by a securities lending agreement to avoid a
securities transaction tax. A gensaki repo involves the buying or selling of bonds or government
securities with a deal to sell or buy them back after a specified period. Gensaki repos are available
for any maturity dates up to one year, but most agreements are within three months or less.
Bankers’ Acceptances
Bankers’ acceptances are not available.
Liquidity Management Techniques

Cash Concentration
Cash concentration is the more common technique used by Japanese companies to manage
company and group liquidity. Zero-balancing is most commonly used, although other forms of
sweeping arrangement such as target balancing are available.
Both resident and non-resident bank accounts can participate in a cash concentration structure
located in Japan. However, companies do need to be aware of Japan’s thin capitalization rules when
establishing cross-border sweeping structures.
Japanese companies are increasingly locating cross-border structures within and outside Japan as
a result of the relaxation in foreign exchange laws. For example, many multinational companies are
establishing treasury centers in Tokyo, London and New York linking individual JPY accounts to a
pool account located in each center.
Notional Pooling
Notional pooling is available in Japan. However, it is not often used. This is primarily because the
tax implications for it are unclear and can make notional pooling too complicated.
Interest optimization solutions are available.
JAPAN
38
Trade Finance
Trade Finance
General Rules for Importing/Exporting

Japan is a member of APEC and the WTO, and is a dialogue partner with ASEAN.
Japan has signed free trade agreements (FTAs) with ASEAN, Australia, Brunei, Chile, India,
Indonesia, Malaysia, Mexico, Peru, Mongolia, the Philippines, Singapore, Switzerland, Thailand and
Vietnam. Japan is negotiating agreements with Colombia and Turkey. It is also in negotiations for a
three-party FTA between both China and South Korea.
In December 2018, the CP-TPP (Comprehensive Progressive Trans-Pacific Partnership), a free trade
agreement between Brunei Darussalam, Chile, Japan, Singapore, New Zealand, Malaysia, Peru,
Vietnam, Mexico, Australia and Canada, entered into force.
In October 2019, Japan and the USA signed a limited trade deal which the Japanese government
expects will boost the economy by 8%. The deal cuts tariffs on US farm goods, Japanese machine
tools and other products.
The trade agreement between Japan and the UK formally came into effect on January 1, 2021.
Japan is a signatory of the Regional Comprehensive Economic Partnership (RECP). The trade deal
creates of a trade bloc covering a third of the world’s GDP. RECP took effect on January 1, 2022,
for the first ten ratifying countries.
JAPAN
39
Trade Finance
Imports
Documentation Required
Imports originating outside Japan will normally need to be accompanied by a commercial invoice, a
bill of lading, a packing list, a customs import declaration certificate and a cargo dispatch document.
Import Licenses
Items which may impinge on public safety, morals and health, and, in some cases, Japanese
industry and the wider economy require import licenses.
The Ministry of Economy, Trade and Industry (METI) grants licenses at no cost.
Import Taxes/Tariffs
Goods imported into Japan may be subject to customs tariffs, an 8% consumption tax (VAT) and
excise duties (for products such as liquor, tobacco, gasoline, LPG, and automobiles)
Japan applies five custom tariff rates to all imports – general, WTO, preferential, least developed
country and temporary – depending on the item and country of origin. Most import duties range
between 3% and 15%, up to a maximum rate of 60%.
Japan operates two free trade zones: Okinawa and Naha.
Financing Requirements
There are no particular financing requirements for imports.
Risk Mitigation
Japan does not operate a national risk mitigation program for importers.
Prohibited Imports
Japan prohibits imports in line with UN Security Council resolutions. Imports are also prohibited
for moral reasons, and to protect national security and intellectual property rights. Imports of
commodities such as firearms, opium and other narcotics are prohibited.
JAPAN
40
Trade Finance
Exports
Documentation Required
Exports to countries outside Japan will normally need to be accompanied by a customs declaration,
a commercial invoice and a bill of lading. Other certificates and permits may also be required.
Proceeds
There are no restrictions on the use of export proceeds.
Financing Requirements
There are no particular financing requirements for exports.
Export Licenses
The METI may require prior consent for export companies whose products could affect the
balance of international trade, national and international security, and the environment. Exports of
certain raw materials for overseas processing and re-importation require a license.
Export Taxes/Tariffs
Japan does not levy taxes or tariffs on exports.
Risk Mitigation
State-supported export credit insurance is available from the Japan Bank for International
Cooperation (JBIC).
Nippon Export and Investment Insurance (NEXI) is Japan’s private export credit agency and is
a member of the Berne Union. The Japanese government reinsures any export credit insurance
agreements offered by NEXI. Both domestic and foreign-owned banks can provide export
financing as well.
Prohibited Exports
Japan prohibits exports in line with UN Security Council resolutions. Japan may only export
military goods to the USA. Since 2009, Japan has banned all exports to North Korea.
JAPAN
41
Information Technology
Information Technology
Electronic Banking
Most Japanese companies have access to electronic banking services, which are known as firm
banking in Japan. There is no bank-neutral electronic banking system in Japan; instead banks
provide their own proprietary electronic banking systems. A full range of electronic banking
services is available, from daily transaction and balance reporting to payment initiation and access
to overseas bank accounts. In addition, companies with access to ANSER (Answer Network
System for Electronic Requests) can view balance records on accounts across several banks
(provided the banks meet with ANSER standards).
The Zengin EDI system (ZEDI), operated by Zengin-Net, enables companies to attach commercial
information such as transaction details to inter-firm remittance messages. This allows for
automated accounts receivable reconciliation. There are 409 bank participants.
Several banks offer internet banking and its use is widespread among both consumers and
companies. In most cases, internet users have a similar range of electronic banking services to
those offered through a physical workstation.
Non-Japanese companies may find electronic banking difficult as there can be problems
translating data from Japanese characters into a readable format for internationally developed
ERP systems. Some international companies therefore choose to work with separate electronic
banking and ERP systems for their Japanese operations.
JAPAN
42
External Financing
External Financing
Long-term Funding
Bank Lines of Credit / Loans

Local (JPY) and foreign currency-denominated term loans are available. Both fixed and floating
interest rates are used. In domestic corporate banking transactions, the TIBOR is common. When
floating-rate bank loans are denominated in foreign currency, the benchmark to determine the
base rate is typically chosen from the popular rates for that currency.
There are three major types of security: pledges, mortgages and security assignments. A pledge
is often created over shares and receivables. A mortgage is used for real estate, and a security
assignment is used for movable properties.
There has been a growth of syndicated loans, which reflects the desire of lenders (banks and
insurance companies) to share risk in unsettled times.
Leasing
A wide range of assets (including vehicles, plant and machinery, IT equipment, and property) are
leased. Leases are mostly with fixed interest rates.
Bonds
Straight corporate bonds, asset-backed corporate bonds and convertible bonds are all issued.
Issuance is limited to high-rated companies in industry-specific sectors such as telecoms.
Non-resident companies can issue JPY-denominated foreign bonds (samurai) and asset-backed
foreign bonds.
Private Placement
Large and small and medium-sized enterprises (SMEs) are able to place bonds privately.
The government-linked Organization for Small and Medium Enterprises and Regional Innovation
guarantees SMEs private bond placements of up to 90% of the issuer’s net worth.
Asset Securitization / Structured Finance

Securitized bonds include accounts receivable, vehicle loans, lease payments, property, residential
and commercial mortgages, and intangible assets. Banks have packaged loans – collateralized loan
obligations (CLOs).
JAPAN
43
External Financing
The public sector is encouraged to securitize assets to back bond funding.
Government (Agency) Investment Incentive Schemes / Special Programs or

Structures
The public sector finances most major infrastructure projects, leaving private finance initiatives for
smaller projects.
JAPAN
44
Useful Contacts
Useful Contacts
National Treasurers’ Association
Japan Association for CFO (JAFCO) — contact Hiroshi Jaguchi –– yaguchi@cfo.co.jp
National Investment Promotion Agency

Japan External Trade Organisation — www.jetro.go.jp
Central Bank
Bank of Japan — www.boj.or.jp
Supervisory Authority
Financial Services Agency — www.fsa.go.jp/en/index.html
Payment System Operators

Bank of Japan — www.boj.or.jp
Japanese Bankers Association — www.zenginkyo.or.jp
Banks
The Bank of Tokyo-Mitsubishi UFJ — www.bk.mufg.jp/global/
Sumitomo Mitsui Banking Corp — www.smbc.co.jp/global/index.html
Mizuho Bank — www.mizuhobank.com
The Norinchukin Bank — www.nochubank.or.jp
Stock Exchanges
Japan Exchange Group — www.jpx.co.jp
Nagoya Stock Exchange — www.nse.or.jp
Fukuoka Stock Exchange — www.fse.or.jp
Sapporo Securities Exchange — www.sse.or.jp
Ministry of Finance
Ministry of Finance — www.mof.go.jp
Ministry of Economy
Ministry of Economy, Trade and Industry — www.meti.go.jp
Statistics Japan — www.stat.go.jp
JAPAN
45
Useful Contacts
Chamber of Commerce
Japan Chamber of Commerce and Industry — www.jcci.or.jp
Bankers’ Association
Japanese Bankers Association — www.zenginkyo.or.jp
JAPAN
46

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CASH AND TREASURY MANAGEMENT

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Area 377,915 km2

Population 126.0 million

Official language Japanese

Currency (+ SWIFT code) Yen (JPY)

Business/Banking hours Business hours: 09:00–17:00 (Mon–Fri)

International dialing code + 81

Country Credit Rating

Long-term rating outlook Negative

Source: www.fitchratings.com, February 2022.

GDP per capita (USD) 34,211 38,586 38,372 39,150 40,014

GDP (JPY trillion) 530 537 547 549 554

GDP (USD billion) 4,379 4,939 4,873 4,972 5,082

GDP volume growth* (%) + 1.6 + 0.8 + 1.7 + 0.6 + 0.3

Consumer inflation* (%) + 0.8 – 0.1 + 0.5 + 1.0 + 0.5

Population(million) 128 128 127 127 127

Unemployment(%) 3.4 3.1 2.8 2.4 NA

Interest rate (local currency MMR)†(%) 0.073 – 0.03 – 0.05 NA NA

GDP per capita (USD) 39,919 – – – –

GDP (JPY trillion) 539 – – – –

GDP (USD billion) 5,049 – – – –

GDP volume growth* (%) - 4.8 - 1.8 + 7.3 + 1.2 NA

BoP (goods, services & income) as % GDP 3.7 – – – –

Consumer inflation* (%) + 0.0 - 0.4 - 0.1 - 0.7 NA

Unemployment(%) NA 2.8 3.0 2.8 NA

Interest rate (local currency MMR)†(%) NA NA NA NA NA

*Year on year. †Period average. ‡Market rate. 

Sectoral Contribution as a % of GDP

Services – 69.31% (2018 estimate)

Major Export Markets

Major Import Sources

Political and Economic Background

Foreign Exchange Rate Management Policy

Major Economic Issues

Japan’s unemployment rate was 2.7% in December, compared to 2.8% in November.

The 242-member House of Councilors is elected either through multi-seat constituencies or

The 480-member House of Representatives is elected by a combination of single-seat

A general election was held on October 31, 2021.

Major Political Issues

An unexpected consequence of the pandemic is that a fall in the number of marriages in

There is no alternative minimum tax.

A foreign dividend exemption systems exempts 95% of dividends received by a Japanese

Advance Tax Ruling Availability

Withholding Tax (Subject to Tax Treaties)

Resident companies 0% 20%** 0% 0% NA

* A 2.1% surtax increases the rates to 20.42% and 15.315%.

*** A 2.1% surtax increases the rates to 20.42%.

Tax Treaties / Tax Information Exchange Agreements (TIEAs)

Japan has adopted a three-tiered approach to transfer pricing documentation – country-by-

Interest Deduction Limitations

QQ otherwise exercises control over the Japanese entity.

Controlled Foreign Companies

QQ net interest payments to related parties not exceeding JPY 20 million, or

Sales Taxes / VAT

Financial Transactions / Banking Services Tax

Capital Gains Tax

Real Property Tax

Payroll and Social Security Taxes

GDP per capita (USD) 34,211 38,586 38,372 39,150 40,014

GDP (JPY trillion) 530 537 547 549 554

GDP (USD billion) 4,379 4,939 4,873 4,972 5,082

GDP volume growth* (%) + 1.6 + 0.8 + 1.7 + 0.6 + 0.3

Consumer inflation* (%) + 0.8 – 0.1 + 0.5 + 1.0 + 0.5

Population(million) 128 128 127 127 127

Unemployment(%) 3.4 3.1 2.8 2.4 NA

Interest rate (local currency MMR)†(%) 0.073 – 0.03 – 0.05 NA NA

GDP per capita (USD) 39,919 – – – –

GDP (JPY trillion) 539 – – – –

GDP (USD billion) 5,049 – – – –

GDP volume growth* (%) - 4.8 - 1.8 + 7.3 + 1.2 NA

Consumer inflation* (%) + 0.0 - 0.4 - 0.1 - 0.7 NA

Unemployment(%) NA 2.8 3.0 2.8 NA

Interest rate (local currency MMR)†(%) NA NA NA NA NA

*Year on year. †Period average. ‡Market rate.